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Aug 09 (38) - How your government's
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About

The Rhode Island Policy Reporter is an independent news source that
specializes in the technical issues of public policy that matter so
much to all our lives, but that also tend not to be reported very
well or even at all. The publication is owned and operated by Tom
Sgouros, who has written all the text you'll find on this site,
except for the articles with actual bylines.

Responsibility:

Tom Sgouros

Sat, 31 Jan 2009

Imagine I've come to you with an idea for lowering heating bills in
your house. "This amazing device will cut your heating bills by a
quarter," I say. Naturally, you say, "What is this marvelous
invention and how much does it cost?" And I reply, "I'm not sure
about either, really, but we'll figure out something. No one will get
hurt, and you know you can trust me because I'm wearing a nice suit.
Did I mention it will cut your heating bills by a quarter? Sign
here." Would you sign or send me packing?

If you were the leadership in the General Assembly -- House Speaker
William Murphy and his team -- you'd sign. Yup, knowing almost none
of the important details, those hard-boiled realists happily bought
the assurances from Governor Carcieri and Gary Alexander, his director
of Human Services, that the Medicaid "global waiver" under
consideration is a good idea. What's more, they bought it in a highly
undemocratic fashion: the Speaker simply declined to schedule a vote
on the subject, and under the terms set last year, it goes into effect
automatically. Legislators who object to this fiasco have had no
opportunity to do so since the idea was sprung on them in a surprise
budget amendment last June.

To his credit, Representative Steven Costantino, chair
of the House Finance committee, had some pointed questions for
administration witnesses last week, and last year when the waiver was
first heard. He clearly understands the risks involved.
However, he and the rest of the leadership must understand that
ringing defenses in the hearing rooms, or penetrating and hostile
questioning of administration witnesses are nothing but show if the
result is that terrible policies are enacted. Make no mistake, the
only way to pay for what the Governor says he intends to do for the
state's long-term care population is to devastate the medical care
provided to the state's poor population. (For those keeping score,
RIte Care is more than two-thirds of our Medicaid patients, but
only a fifth of the costs.)

The stated intent of the waiver -- letting long-term patients choose
less expensive home care over institutional care -- is a good
thing. Many people will be glad to have that alternative, which they
haven't had before. But it's simply not realistic to think these
changes are going to cut $67 million from the Medicaid budget in only
a few months. To put it in perspective, this is around 10% of our
annual expense for long-term care. Home care is cheaper, but it's not
magic. Potential savings are in the neighborhood of 35% per patient,
according to studies I've seen. There are between 7,500 -- 8,500
people in nursing homes. To get 10% savings this year from that
population alone would require moving around 2,000 people from
institutional care to home care between now and, say, next week. And
where will the home care workers come from? The visiting nurses and
other suppliers say they don't know. People have to be hired and
trained, and that doesn't happen overnight. The whole proposition is
absurd.

Under the terms of the global waiver, because it's "global", money
can be transferred from RIte Care -- medical care for the poor -- to
nursing homes and elder care. Because it can be transferred, it will,
because we'll be broke.

RIte Care has been under seige for a while. In recent years, co-pays
have gone up and eligibility rules have been tightened. And there
have been other, more subtle attacks on the quality of care. For
example, starting February 1, a rule is going into place to forbid
RIte Care doctors from prescribing anything but generic medication.
Generic medications aren't a bad idea, but it takes a fair amount of
time for good drug ideas to appear as generics, and some drugs never
do. The result? Doctors for the poor won't be able to prescribe what
they think best for their patients. In a world of limits, we're not
going to be able to fund all treatments, but we're not talking about
heroic end-of-life measures here. For example, some of the most
effective medicines for kids with ADHD have no generic version, and
there are plenty more like that.

It's a bit unclear whether this change is part of the anticipated
Medicaid savings, but there's a push to modify this rule to allow some
non-generic medications. I'm glad to hear it, but what of the budget?
The Assembly is on record approving the budget; who are they to
complain about the details?

House Finance is currently reviewing a bill to demand oversight of the
changes the Governor would make to Medicaid. But this is an empty
gesture, like shaking your fist at the burglar after he's run away
with your money. About the only thing the Assembly can do now is
demand that the Governor not achieve the cost savings he intends.
If they know how to get the cost savings, they should have put that in
the budget. If they don't believe the cost savings he intends will be
good for the state, they shouldn't have passed the waiver in the
first place.

To allow the savings from the waiver into their budget, and then to
demand that it be done in a way that won't achieve the savings is,
well, it's not a sound way to conduct your state's business, is it?

Finally, let's remember that RIte Care is a program designed to save
money. Poor people get sick whether they have affordable health
insurance or not. If they don't, they wind up seeking help at
hospital emergency rooms, where they get it at great expense. Or they
don't get it, and die, and that ruins the feng shui of our cities.
RIte Care has been a very successful program -- it has saved us money
-- letting the program decay will be expensive in the long term, even
if it saves us some dollars this spring.

Mon, 26 Jan 2009

Last week, the US Immigration and Customs Enforcement Service
terminated its contract with the Donald W. Wyatt Detention Facility in
Central Falls, part of the continuing fallout over the death last
summer of Hiu Lui Ng, a Chinese computer engineer who had overstayed
his visa and was in detention there. This is as good a time as any to
review history of the Wyatt jail. But first, a word about the
real-world meaning of sophisticated economics abstractions.

A few months ago, I had to buy a new stove. The event gave me an
opportunity to reflect on the phenomenon of productivity. This is the
amount of goods or services a company provides divided by the cost of
making it. Increasing productivity is a grand-sounding economics
abstraction that conjures up images of marvelous robots and
complicated machines that automatically weld each metal panel onto my
stove, along with the logistics advances and Just-in-Time inventory
controls that cut warehouse expenses. Not only does it sound grand,
but doesn't it do your heart good to know that American productivity
growth over the past 10 years was double the two decades before?
Picture with me the armies of efficiency experts, manufacturing
engineers and computer programmers who made possible this revolution
in manufacturing. Marvelous, no?

But technically speaking, increases in productivity don't just mean
assembly-line robots. They also explain why my stove's bottom drawer
is a flimsy and nearly useless piece of junk that already jumps its
rails as a matter of course. Whoever it was who figured out how to
make a stove drawer out of plastic and what seems like tinfoil
increased productivity just as much as the engineers who figured out
how to assemble it efficiently. That is, there are good and bad ways
to increase productivity. The market is supposed to be the arbiter of
which ways remain in use, but in a market driven by price, quality
will always be driven to the ragged edge of adequate. (Or beyond --
since when is a sled a disposable item?)

So now consider prisons. Ideas for increasing productivity have been
lurking about since Jeremy Bentham developed his "panopticon" design
in 1785. His idea was that by laying out the cells properly, one
guard could see all of them, and adequately guard many more prisoners
than in a prison of a more traditional design. That's a useful
insight, and lots of prisons are built to incorporate some of these
ideas now.

But another way to increase productivity is just to skimp on training
your guards, pay them poorly, be stingy with inmate medical care, and
buy cheap food, too. Unlike my stove drawer, though, people's lives
are put at risk by these kinds of productivity increases, and last
summer, Mr. Ng died, reportedly due to a lack of necessary medical
care. Here's the best part: this is a completely predictable outcome.
Once private companies start competing for business, in an environment
where price rules, you can count on the service eventually to settle
to the level of barely adequate, if that. What's more, to advocates
of privatizing services, that's the whole point.

There are some forms of increasing productivity that are utterly
inappropriate for public services, because lives are at stake. It is
not unreasonable to prefer quality over price in public services.
Why? Because I want the people who teach my children to be the best
available, and because I want the people who put out the fire in my
house to be that way, too. I want our insurance regulators and the
public health technicians and the people who look after the health of
our Bay to be the sharpest we can get, too. And the rest.

Ours is the politics of polarization, and as part of that, calling for
quality public services is routinely portrayed as being a tool of
public employee unions. But this is profoundly, well, dumb, the
perspective of people to whom cost is not just everything, it's the
only thing. The fate of Mr.Ng tells us they could hardly be more
wrong. Having quality services doesn't mean capitulating to public
employee unions. I want my government to bargain hard, but in good
faith. But I also want them to acknowledge that cost is important,
but low cost is not always the highest good.

Another dirty little secret privatizers won't mention is that you
often don't even get the low costs. On the other side of the coin, we
have, just for example, Northrop Grumman, the private contractor who
maintains the computer system that we use to pay food stamps and
welfare checks. The state doesn't have the expertise to do their job
-- and chose not to acquire it as a matter of policy -- so we're on
the hook to them for $5 million every year, and there's not a blessed
thing we can do about it without investing serious money to rewrite
the system.

Wyatt was built in 1993, part of generational movement to privatize
services traditionally supplied by government. It was supposed to be
that magic "win-win" with investor profits, payments and jobs for
Central Falls, and cheap rates besides. (Yes, and I'd like to talk to
you about some magic beans I have for sale.) Now we see the truth:
the salesmen sold us unsafe conditions, few jobs or money for the
city, but comfortable profits for them. Over the first few years,
investors earned over 9% returns, including a windfall one year of
around 28% when the city refinanced some of the Wyatt bonds. They
earn income per prisoner, and also by raking off the cost of phone
calls, something the state prisons aren't allowed to do. With any
luck, the privatizing wave is about to pass us by, because while it
has saved us some money here and there, it has too frequently become a
source of profits for a very few and expense, embarrassment, and
disgrace for the rest of us.

Fri, 16 Jan 2009

Last week we saw Governor Carcieri unveil his plan for solving the
state's budget nightware. There are some good ideas in it: reforming
long-term care for the disabled and elderly, increasing the size of
the state's health insurance purchasing pool and relieving some of the
unnecessary legal burdens on cities and towns. These are important
changes, and I wish they'd been undertaken years ago, but these
weren't the meat of the matter. Unfortunately.

In his speech, Carcieri said our state "faced difficult choices."
Unfortunately, he chose the easy way on every single one of those
choices. What's so difficult about that? He would have us balance
our budget by throwing poor people, state employees and cities and
towns under the bus. Better now than in a few weeks. After RIPTA
makes its schedule cuts at the end of January, it will be hard to find
a bus.

He closed this way: "The decisions I have outlined here tonight
balance our budget without raising broad-based taxes, without removing
the safety net from anyone in need, and without putting anyone out of
a job." It sounds good, even stirring, but not a word of it is true.

To begin with, it doesn't even balance the budget. The only way he
gets to balance is by putting off some big payments (like the Station
fire settlement) into 2010, "selling" some state land to RI Housing, a
state agency, and praying the federal government will raise the
Medicaid match by 3 percentage points in a couple of weeks.

Number two, "broad-based taxes." He's proposing to cut more than $122
million from the budgets of cities and towns, in the current fiscal
year. It's not at all clear how the towns will get through the year
short 4% of their budgets, but state property tax limits don't apply
to towns who have to make up for cuts in state aid, so many will
respond by increasing their property tax rates in the coming year.

Number three, what about the "safety net"? After months of inadequate
explanations, it's still hard to see how the Medicaid waiver saves us
any money this year without dramatically tightening eligibility rules
or reimbursements in RIte Care. All of the good things he promises
about changing the way we deliver long-term care could have been
achieved without a waiver so broad. The Governor continues to claim
it's all a good thing and will result in better care for less money,
but he and the head of DHS are still the only people who don't wonder
how.

Which brings us to number four, that no one is put out of a job. How
does he imagine the towns will make up $122 million if not with
layoffs? For example, he proposes cutting the requirement for school
bus monitors. Does he imagine that school committees -- without the
money or the legal requirement -- will simply keep these employees on
out of the goodness of their hearts?

But more important than the individual parts is the central fraud,
that we can cut costs by this huge amount, and you and I won't feel
it. What government program has he said he will cut? None. Here's
why that's important. Having six people in an office that had 20 last
summer and who are completely swamped and unable to be effective at
their jobs is a waste of money.

Have you wondered where the waste is in government? It's right there
in front of your eyes, in transportation departments that can't afford
to maintain our roads, in environmental protection departments that
can't do timely reviews of the permits in front of them, in child
protection services that put the state at serious risk of having a
child die in its "care" and all the rest. Trying to run programs like
these on a shoestring isn't a terrible idea -- being economical is a
good thing -- but only if we're honest when the shoestring breaks.
Otherwise, government becomes more expensive and less effective,
pretty much what we've achieved under this governor.

The budget proposal does address the revenue side of the equation.
But is it really fair to raise cigarette taxes by a dollar a pack
while giving a few thousand families a tax cut worth thousands of
dollars apiece. Yes, that's right, during the budget address, the
Governor repeatedly mentioned that he was going to get us out of this
without raising broad-based taxes. Mentioned nowhere was that this is
year three of a five-year plan to cut the taxes of the richest
14,000 taxpayers in the state, estimated to cost the state at least
$35 million this year. As of a few days ago, on January 1, if you
earn more than around $300,000, your income taxes went down by as much
as 7%. If you take home $500,000 a year, you'll keep an extra $2,500
this year, which will more than cover the property tax increase you'll
see.

The worst part of all this is that the Governor has us perfectly
positioned to absorb and neutralize most of the good a federal
stimulus package might do. Paul Krugman wrote a couple of weeks ago
about the danger posed by "50 little Hoovers" contracting their local
state economies even while the federal government is poised to add
stimulus. The deflationary effects of Governor Carcieri's budgets will
offset a huge chunk of whatever stimulus is sent our way.

So there's the wrap-up: the Governor relies on one-year gimmicks and
stiffing poor people, unions and municipal government to get through
one more year. In return, we get an ineffectual but still expensive
government, and we get devastating and deflationary cutbacks virtually
guaranteed to neutralize much of the help we might get from
Washington. The legislature will do well to lose this embarrassing
proposal and write something new. Sadly, the difficult decisions are
now theirs to make, and we know how good they are at that kind of thing.

Sat, 10 Jan 2009

Some folks, of course, will oppose the Stark plan
because they’re right-wingers who don’t want to expand
health care coverage. And some folks, will want to focus their
energies on other, worse, plans because those plans have a better
chance of passing. But what’s incredibly frustrating is that a
lot of people who claim to want to change public policy to expand
health care coverage and better control health care costs will
nonetheless fail to embrace Stark’s plan or anything similar for
no real reason other than ideological posturing. It just
can’t be the case, as a matter of centrist dogma, that
the best solution is actually the most left-wing solution. It’s
a far more ideological stance than anything you’ll ever hear
from Pete Stark or from me. But the people hewing to it will insist on
being called pragmatists.

An article in the New York Times a couple of weeks ago drew heavily on
the irony that the private Donald Wyatt jail in Central Falls relies
heavily for its income on the Department of Homeland Security. DHS
places arrested illegal immigrants there, many of whom have recently
been arrested -- in Central Falls. The irony is rich and the human cost
of the arrests combined with the insanely opaque immigration
bureaucracy is tragic, but what of the big story? Illegal immigration
is constantly in the news, but why is it so hard to find a solution?

Solution? Maybe it's best to ask first, what is the problem?

Some say it's obvious: illegal and mostly Hispanic immigrants are
taking jobs that could be held by native-born Americans. But it used
to be obvious that housing prices could rise faster than wages
indefinitely, so calling it obvious isn't good enough.

I spent some time this week reading survey research from the Pew
Hispanic Center, a group of researchers in DC who study issues
involving our nation's Hispanic population. They do a lot with
vanilla Census data, but in late 2004 and 2005, they also managed to
survey about 4,600 Mexicans, most of whom were undocumented
immigrants, and those results are fascinating.

I read one Pew report pointing out that the employment prospects of
native-born workers are not very well correlated with growth in
immigration. Cities and states with lots of immigrant growth seem
also to be places where it's not hard to find a job. This is, as is
much social science research, not much of a surprise, on second
thought.

The story of a couple other reports is more telling: our nation's job
market has split into a collection of jobs held largely by Hispanics,
many of whom are immigrants, and a collection held by everyone else.
The first collection, including dishwashers, janitors, and
landscapers, are low status and paid terribly, and the second
collection largely isn't. Immigration probably has very little effect
on this second collection, but in the first group, undocumented
workers probably are holding down wages.

So what about just sending them all away? Ignoring for a moment, the
monumental task of collecting and deporting 12 million people, if
you could wave a magic wand and send all the undocumented workers
home, you wouldn't magically get jobs for the people left behind.
Why? Because these jobs pay too little for many people to survive on
them. The Pew survey found that the median wage for immigrants was
$300 per week. Another way to say it is that at least a third of the
group surveyed were working for less than minimum wage, and that's
only if you assume they're all limiting their work to 40 hours in a
week. How do immigrants afford it if other people can't? By
living with family, friends and boarders, and by paying more of their
income for less housing than anyone else, according to a 2006 Notre
Dame study I found. One in five Hispanic households headed by
non-citizens have three or more wage earners in them. For the rest of
us, it's about one in nine.

In other words, what would happen if all Rhode Island's undocumented
immigrants could be transported elsewhere is that the job ads to
replace them would go unanswered, except to companies who chose to pay
higher wages, who would go broke because they'd lose all their
business. (If you could make them all vanish at the same time, it
might work, but we can't do that.)

Any business that employs immigrant labor, be it a janitor service
company, a restaurant, a landscaper or a plastic molder incorporates
the wages they pay into the prices they charge. Decades of dumb
immigration policies have made it so that layers and layers of
business now depend on these prices being very low. A software
business may not rely directly on immigration, but they do rely on low
rents, which in turn depend on bargain rates for janitorial services
and landscaping.

And that's the real problem with immigration enforcement. We can make
rules about not hiring undocumented workers (and we certainly have
lots of those) but the sad truth is that our nation has hundreds of
thousands of businesses whose business plan requires them to seek the
cheapest possible labor. It's not as if this is a surprise, either --
this is part of the big-fish-eat-little-fish ocean of competition that
businesses swim in. There's no point in feeling sorry for them, but
we need to understand the fix they're in before useful policy
solutions can be found. Simply telling them to become our enforcers
by using E-verify (a tool that doesn't work) isn't going to do the
trick because the honest ones will fail, and the cheaters survive.

Does this mean we're all doomed and there's nothing we can do? Not at
all. Government has a plenty of tools at its disposal, but it has to
use them on the right problem. In this case, the problem isn't just
immigration, but the structure of the job market, that entire
categories of jobs simply don't pay enough. We can help both by using
the government's tools to begin to push up the wages of people at the
bottom of the ladder, as well as to make life livable by people who
subside there. We can raise the minimum wage or create and enforce
living wage rules, or support union organizing efforts. We can also
help people survive better on a lower wage by figuring out how to get
health care out of employment decisions, improving the child care
options for poor families, and pushing the market to provide more
affordable housing.

Sadly, none of this is as easy to describe as simply demanding the
impossible, preferably in tones of outrage. So our policy makers
resort to that, time and time again, and everyone wonders why things
don't get better.

Sun, 04 Jan 2009

Right before Christmas, the Census Bureau published its estimates for
state population changes as of July 2008. The news wasn't great for
Rhode Island, which is along with Michigan, one of only two states to
lose population between 2007 and 2008. You can bet that this will
provoke the usual round of teeth-gnashing, I am sure, and since most
of the usual teeth-gnashers find everything to be a reason to cut
taxes on rich people, you can bet that's coming, too.

But what is the story behind these numbers? Is it worth inquiring
further about what they really mean? Your answer to this question
will depends on whether you really want to solve problems, or whether
you just enjoy complaining about stuff. I am interested in solutions,
so I peeked, and this is some of what I found.

The first thing worth noting is that our population decline is less
than it was last year. We lost a lot of people in 2005, but things
have been getting better since then. This is the opposite of the case
in Michigan, whose population loss is getting worse. By itself this
isn't necessarily cause for comfort, but it does mean that whatever is
going on here is probably not the same thing as is going on in
Michigan. Undoubtedly a part of the problem is the lack of jobs here,
but the population drop was greater last year, when the unemployment
rate was much lower, so that's not really a satisfying explanation.

So, it seemed worth turning over some rocks. I looked some at the
components of the changes: births, deaths, migration. One interesting
thing is that our "natural" growth rate (i.e. not counting migration)
is lower than many other places. For example, in 2007 we had 12
births per thousand people and so did the metropolitan Boston area.
(The detailed numbers for 2008 aren't available yet.) But they only
had 7.8 deaths per thousand people, while we had 9.3. Ours is an
older population than in many other states.

Isn't this just an unimportant detail? No. Look at Connecticut's
Fairfield County, which contains Bridgeport, one of the poorest places
in New England, but also Westport, one of the richest in the country.
Fairfield has only about 12% fewer people than our whole state. For
every thousand people in Fairfield in 2007, 10.5 left for another
place in the US, while 9.5 left here. But Fairfield's death rate is
much lower, and they get more immigration from other countries, so
they're holding steady in overall population.

At this point, I thought to myself, these numbers are only estimates.
The Census statisticians are good at their jobs, and I'm not going to
contradict them, but we have some real numbers, too. I recently saw a
table of Rhode Island district school enrollments over the past five
years, and those numbers are even more unsettling. With the exception
of Barrington, all of our school districts have lost students since
2004. Some districts have lost more than 10% of their students over
that time. South Kingstown and Providence have lost 12% and Newport
has lost 21%.

Declining school populations reveal that the Census estimates are
probably right, and since we seem to be losing a higher percentage of
students, it's likely that the departing population is a lot of
families with children.

School enrollment data, because it's sorted by town, give us a way to
probe for possible causes. I tried correlating the losses with other
kinds of survey data about our towns, and wasted an afternoon testing
variables like median incomes, per capita incomes, proportion of
renters to owners and so on. The best correlation I found was with
the ratio of average rents to income. The higher the average rent as
a proportion of the average income, the more likely a district is to
see enrollment losses. (You can find some of the statistical details
and a pretty picture at whatcheer.net.) In other words, the more
expensive the housing in a town, the more likely those schools are to
have fewer kids today than in 2004. Our population loss is as likely
to be an affordable housing issue as it is anything else.

None of this is to say these numbers are not very worrisome.
Declining populations have real consequences for government services,
and the most important consequence is that the cost of the services we
provide goes down slower than the number of people they're provided
for. It's sort of a reverse effect to economies of scale. It costs
just as much to educate 20 kids as it does to educate 25, because you
still need a teacher and a building and heat for the classroom and so
on. Losing five kids does not mean you can cut five kids' worth of
education funding, even if the state and lots of town councils try to
manage things that way.

So what do we do about this? Right at the moment, of course, we can't
really build much housing because of the fiscal handcuffs our leaders
have put on. But building our way out of the affordable housing
problem has never been a good option. We can address the housing
market in a useful way -- with laws about housing speculation, and
rules to preserve rental units and favoring rental income over capital
gains. Addressing the real pressures on municipal budgets would help,
too, since property taxes are a big part of rents. We must
acknowledge that affordable housing is an economic development
issue. You want jobs here? We need places for people to live where
you don't have to go broke just to pay the rent.

The X axis is the ratio of median rents to median incomes, and the Y
axis is the change in public school enrollment between 2004 and 2008.
The line is fitted to the points using a simple least-squares method.
For them who are interested, the slope of the line is good to about
the 99% significance, while the intercept is only good to the 95%
level. (See below.)

Update: The graph was mislabeled, leading to the impression that
these numbers were much smaller than they are. I fixed the offending
axis label, my apologies to all.